The Canadian First-Time Home Buyers Guide 2019

For most people, buying a home is the single largest investment they will ever make. Buying a house is exciting, but also a highly complex financial transaction with unique risks and rewards that can blindside first time buyers.

To make sure your first real estate acquisition goes as smoothly as possible, we’ve compiled decades of real-estate experience into The Canadian First Time Home Buyers Guide.

We cover the most critical aspects of buying property in Canada in 2019, including house hunting, financing, tax incentives, unexpected costs, home insurance, and renovations.

Read this guide and arm yourself with the knowledge you need to get the best deal, avoid nasty surprises, and keep yourself at ease along the way.

Market Research

The Market Research phase involves looking at home listings in your target area to help you identify a good deal from a bad one.

Take a close look at homes that have recently sold in your target area. How much did they sell for, how long were they on the market, and did the buyer pay above or below asking price? Have home prices gone up or down over previous years? Will government policy impact demand?

Also have a look at pending and expired home listings to evaluate housing supply vs demand in your region, and how much negotiating power you’ll have with sellers.

The sooner you start your research the better.  How do you do this you might ask?  Just ask your agent of choice to set you up on a portal for property in your price range and have it include the Active, Sold, Expired and Pending listings.  This is a great step when you are still 3-6 Months out from actively looking at properties.

Pre-Approval 

Before getting too far into the home search, it’s important to get pre-approved for your mortgage so you know what you can afford. In pre-approval the bank or mortgage broker looks at your personal finances to determine how much money they’re willing to lend you.  They will do a calculation called a debt-service ratio to determine your maximum monthly payment based on your verifiable income.  If you would like to play around with a debt service ratio calculator, CMHC has one here.

This is a critical step that should not be missed.  Some buyers waste hours upon hours looking at homes that are either above or below their price range.  It can cause real heart ache to fall in love with a property, make an offer, move into the home in your mind, only to have the dream shattered by being denied the mortgage.  

Pre-approval is time-limited, so be sure to ask how long yours lasts for. Typically they will hold an approval for you for 3 months, but 6 month holds do exist at some institutions.

When you do find a great property that fits your budget, having mortgage pre-approval gives you the ability to move very quickly and negotiate from a position of total strength with your mortgage offer.  

Your agent will have the ability to present your pre approval letter when they go to negotiate the offer on your behalf.  This will really bolster your negotiating position and may be the reason your offer is selected over a competing bid from another buyer.

Market Education

Once you’ve completed the research phase and have been pre-approved for a mortgage, Market Education is your next step. The name of the game is to get out and look at a variety of homes and neighborhoods that fall into your price range. Market Education is not about looking with the intention of buying.  I repeat, NO FALLING IN LOVE!  This step is all about understanding what kind of homes are affordable.

Market education is a crucial step that most agents skip over as they believe it is a waste of time.  You must insist on this. 

You’ll find a wide variety of property types at each price point. For example, at the average home sale price of $540,000 your search could include luxury condos, starter homes, brand-new townhouses, brand-new infill housing downtown, or a rural acreage - the options are nearly endless. The only way to narrow down your home hunting criteria is to understand what’s out there.

Market education helps to clarify your true buying criteria, which you can then organize into a list of needs and wants. 

Needs vs Wants

A want is a nice-to-have, where a need is an absolute must-have.  Things like a minimum amount of bedrooms, yard size, or a mortgage helper fall on your needs list. Some items that you should consider as needs are:

Size:

• How many bedrooms and bathrooms – are you planning for growth?

• Single family home, condo, or multiplex

• Yard size – need room for doggo? Garden, play, or build a treefort?

In addition to your house and property, outline requirements for your ideal neighborhood. For example:

• Distance to work, schools, and shopping

• Recreation and entertainment

• Access to healthcare

• Walkability and transit access

• Safety – the RCMP posts crime heatmaps neighborhood by neighborhood

• Future development plans  - You might like your quiet street and view now, but not after that new apartment tower goes up. Take into account any future projects the local municipality has approved for your neighborhood or street.

Visit the neighborhood (at all times of day)

We recommend visiting each neighborhood in your search during the daytime and nighttime to make sure it lives up to your expectations. Some neighborhoods really come to life at night, and others totally quiet down – it all depends what you’re looking for.

Where To Look 

Matrix Multiple Listing Portal - Once you’re ready to start viewing homes, find an agent who you can envision yourself working well with over the coming months. Real estate agents have access to the Matrix Multiple Listing platform which filters through thousands of properties and delivers you a short list of homes matching your exact list of needs.

For example, a custom search can automatically send email alerts with any 2-storey homes in Glenmore, built after 1970, with a basement suite, at least a 2-car garage, and a large, fenced yard for dear Bowser. By getting clear on your needs and wants, you can have the Matrix system save you time by automatically eliminating everything that doesn’t match your must-have list. 

Remember: buying a home is more a process of elimination rather than selection.

Realtor.ca is the single largest database of real estate listings in Canada, and lists every property available on the MLS (multiple listing service). 

Realtor.ca is an excellent resource during the early stages of your home search or if you are just doing drive-by shopping.

Hidden Gems

In the Okanagan, Castanet.net, Kijiji.ca, and Forsalebyowner.ca are all great sources of by owner listings. You’ll find properties on these sites that aren’t listed on the MLS because the sellers are trying to save money on realtor fees. You can approach these sellers directly and do your own negotiating, or get help from an experienced agent. A real estate agent can walk you through the process of purchasing an unlisted home and protect your interests every step of the way.

More Hidden Gems 

Coming Soon Kelowna offers pre-market access to Kelowna homes that aren’t yet listed on the MLS, but will be soon.  This little-known website can give you a jump on other buyers in Kelowna who only search the MLS.

Hiring a Real Estate Agent 

Having a trusted real estate agent on your side can be a highly valuable resource when you’re purchasing a home. Buying agents help people find homes every day and will provide objective, unbiased advice based on real experience. When it comes time for negotiations, a good agent takes the gloves off for you so that you get the best price and the right terms.

Designating a good agent to represent you during your home purchase gives you a pile of advantages and rights as a client.  Your agent will have what is called a fiduciary duty to protect your interests the whole time.  They must always do what is best for you at every step of the way and they have a duty to discover and disclose to you all known facts about the properties you are interested in.  

Most buyer’s don't know the questions to ask, let alone where to find the answers.  Having a qualified professional that does this every day will not only save you hours and hours of time researching, but will give you the peace of mind knowing that you are protected.

Buying a home where you’ll probably live for a good portion of your life - and perhaps raise a family in - can be an emotional decision that sometimes leads to hasty decision making. This might mean landing on a subpar match or overpaying. A good agent will steer you away from a bad choice, and give you the nudge you need when a great choice presents itself. 

Buying agents can also save you a ton of legwork as they’ll have contacts that have been vetted for inspection, appraisal, lending, insurance, legal services, and contracting.

Many people assume that an agent will be "selling" you the homes you go through just like you see on reality TV - demonstrating the home’s features like a car salesman trying to entice you to sign on the dotted line.  This is not the role of a buyer's agent.  

An agent's job is to listen to your needs, consult you through the process, facilitate access to all of the homes you wish to see, provide you with confidential assistance, and eventually, when you are ready, negotiate like a pitbull to get you the best deal possible and protect your interests every step of the way.

You get all of this and more from a top tier professional who works around the clock on your behalf, and it's perhaps the only instance in life where you’ll get dozens of hours of a skilled professionals time without ever seeing an actual invoice. When the home changes hands, the the buying agent’s compensation is almost always paid for by the seller or the seller’s agent.

As Phil Dunphy, the father in the show Modern Family, says, “every realtor is a just a ninja in a blazer.” Jokes aside, it’s important to select a trustworthy agent with a good reputation. They say an agent is only as good as their last sale, so ask someone you trust for a referral or check their online reviews.  A simple google search for Best Kelowna Realtor is a good place to start. 

Home Inspection

Before deciding on a property, it is vital that you hire a professional home inspector to examine the condition of the home’s structure and systems. A home inspector will look at things like windows, doors, insulation, roofing, plumbing, heating, and air conditioning and then provide a detailed report. A home inspection will generally cost between $500 and $800, depending on the size of your home. 

Buying an older home comes with the reality that there will be some issues. Small or large items that come up in the inspection. You will want an agent that can help you determine the financial impacts of the items that turn up. For example, a furnace near the end of its life-span can be a $5k repair. Issues with concrete structures will cost at least $10k to fix.  Inspections only deal with the systems of the home, they don’t speak to the cosmetic issues of the home.  A good agent can consult you on the costs of improving the cosmetic defects as well.

While not mandatory, a home inspection is a very small price to pay in the grand scheme of things.  For our buyers we insist on a licensed professional handling the inspection.  When you hire a professional home inspector to go through an older home, expect them to find dozens of deferred maintenance items and things that don’t quite meet the current standards.  This is extremely normal, and you should discuss this ahead of time with your agent so you are prepared mentally for the list of things that come along with buying a previously loved property.  If something truly unexpected pops up in the inspection, you reserve the right to negotiate the cost of repairs with the seller.  

Home Appraisal

An appraisal is an expert estimate on the market value of a property that banks use to calculate your eligibility for a mortgage. For an average-sized home, an appraisal costs between $300-500 and is typically paid for by you, the borrower. Without a home appraisal, it’s not possible to get mortgage financing.  This is how the bank protects their interests ensuring you aren’t paying too much for the home.  Think of it as additional peace of mind that you are paying an appropriate price for the home you fell in love with.  

Your agent can follow a very similar process that an appraiser uses to determine the market value for the property.  This is called a comparative market analysis (CMA) and is something a good real estate professional will do for you, for free, prior to you making an offer on a property.  This CMA often becomes the basis of negotiations with the seller as well.

Mortgage Financing

A mortgage is a loan from a bank, broker, or credit union that’s used to purchase a home or property. Unless you have half a million dollars burning a hole in your pocket, you’ll need one to buy your first home.

Mortgages are ‘secured’ against the value of the home, meaning that if the borrower (that’s you) fails to make the agreed-upon payments, the home can be repossessed by the bank as collateral. This is why it’s crucial to get a mortgage that you can afford now and in the future.

Before sitting down with a mortgage broker, arm yourself with knowledge so that you’ll understand what a good mortgage deal looks like and avoid the all-to-common mistake of becoming ‘house poor’.

Principal vs Interest

Mortgage payments are broken down into principal and interest amounts. Principal payments go towards the price of the home, while interest pays the bank for the cost of borrowing money.

Generally speaking, buyers with higher credit scores and stable income enjoy lower interest rates than buyers with lower credit scores.

At a basic level, consumer mortgage rates are based on the Bank of Canada’s overnight banking rate, which closely follows the United States Federal Reserve rate. The main thing to understand about rate setting is that it’s out of our control, and very unpredictable.

Large interest rate increases can be devastating for mortgage holders. In 1981, Canada’s mortgage rate skyrocketed above 21%, which meant thousands of homeowners were unable to meet their mortgage obligations, leading to default or bankruptcy. To give you some perspective, Canada’s mortgage rate for 2019 is around 3.5%. While it is extremely unlikely we will see 21% interest rates again, it’s important not to stretch yourself too thin so that you are prepared for a possible rate hike.

At the date of publication, June 11th 2019, a growing number of economists are forecasting no further rate hikes in Canada or the USA over the next two years. In fact, some are predicting near zero and even negative rates on the horizon.

Amortization Period

Amortization period is the length of time that you will take to pay off the loan.  The most common amortization period for first time buyers is 25 years so make sure that you use this figure when playing with a mortgage calculator.

The longer the amortization period, the lower the payment.  Example: If you borrow 100 dollars from a friend and they give you 2 months to pay them back you could pay them 50/mo where if they said to take 4 months to pay them back you could pay 25/mo.

A 30 year amortization period is available for buyers putting a minimum of a 20% down payment down.  This is referred to as a conventional mortgage.  One thing to understand is that although the payment is lower, the amount of principal vs interest you are paying changes.  The longer amortization will mean more of your albeit lower payment is comprised of interest.  You are paying off the balance slower so this is to be expected.

Some Savvy buyers opt for the longer amortization period to keep their minimum payment low, and then they accelerate their repayment by option for bi weekly payments, this alone can shave a few years off the amortization because it equates to an extra monthly payment per year.  Another strategy is to round your payment up a bit.  If your minimum payment is 2264/mo, consider paying 2300 even. This extra 36 dollars per month, spread over two bi weekly payments of 18 dollars will barely be felt but will do wonders to accelerate your loan repayment as the extra 2,732 per year goes straight to your principal balance.  

Advanced Tip: This not-so-little mortgage reality is overlooked by even experienced home owners.  With amortization, as time goes on, your payment stays constant, but each month your principal balance is reduced and this changes the ratio of principal vs interest you are paying.  Banks are smart and they know  people only stay in homes for an average of 5 years before moving on.  Most people select a maximum mortgage term of 5 years as well.  Mortgages are structured so that the first 5 years of payments have the most interest (More than half your payment) It’s not until 5 years and beyond that you really start eating away at the loan balance.  

What this means to you is that there is a lot of value in staying on the same amortization schedule you started with.  When you do decide to move from your first house, consider porting your mortgage over to your next home so you can enjoy the faster principal paydown on your next home.  Also at the end of your 5 year term, even though you may stay in the same house, the banks will urge you to refinance and start the clock back at zero.  Do the calculation with the loan officer and you will see that keeping you current amortization schedule is advantageous do to the lower interest cost.

Fixed vs Variable Rate Mortgages 

Banks offer mortgage loans as variable rate, fixed rate, or as some combination of the two.

With a variable-rate mortgage, your interest payments fluctuate depending on market interest rates. Variable-rate mortgages typically offer lower interest rates than fixed-rate mortgages.

With a fixed-rate mortgage, your principal and interest payments are agreed upon for the duration of the mortgage term. Fixed-rate mortgages can be thought of as a form of insurance against interest rate hikes.

Is fixed or variable the better option? That depends on you.

If you expect interest rates may rise during your mortgage term, you will have more peace of mind with the stability of a fixed rate mortgage. On the other hand, if you think rates might go down during your term, a variable rate mortgage would let you save money on interest payments.

If you’re not sure, some banks are now offering ‘split rate’ mortgages which are a blend of fixed and variable.

Open vs Closed Mortgages 

Mortgages are offered as either ‘open’ or ‘closed’.

 An open mortgage gives the borrower the flexibility to pay off their entire mortgage amount at any time. If a homebuyer has a sudden windfall of cash, they can use it to immediately pay off their mortgage without incurring any penalties.

On the other hand, a closed mortgage limits the amount of principal that you can pay back each month. Closed mortgages charge penalty fees on any payments made in excess of the agreed upon amount. So what’s the best option for you? Well, that depends.

Closed, variable rate mortgages are usually the cheapest option in terms of interest rates, but they do not offer the same degree of flexibility. It’s still possible for a borrower to accelerate payments under a closed mortgage, but it might be more costly overall compared to an open mortgage.

It’s worth speaking to a real estate advisor to determine the ideal mortgage options for you before sitting down with a banker.

Down Payment

A down payment is a cash deposit made by a home buyer to secure their mortgage, which is usually 20% of the total home value in Canada. For example, if you bought a $500k home with 20% down, the down payment would come to $100k ($500k * 20%) and you would owe the bank the remaining $400k, plus interest.

The minimum allowable down payment to buy a home in Canada is 5%. This is referred to as High ratio financing and will be subject to CMHC Fees discussed later.

20% Rule

Home buyers in Canada are legally required to purchase mortgage insurance if their down payment is less than 20% of the home’s value.

As mentioned above, a 20% down payment or more opens up the option of the longer amortization period which can make the monthly payment more manageable.  It is not uncommon these days after sustained appreciation in the real estate market, for parents of first time buyers to have significant equity in their personal homes.  We are seeing a trend of first time buyer’s borrowing the amounts required to top their down payments up to 20% from their parents home equity line of credit.  

For example borrowing 15% of a 550,000 purchase from their parents interest only credit line at say 4% interest would have a monthly interest obligation of $275 dollars.  With 20% down and a 30 year amortization, the payment goes from $2,608.69 to $1,922.19 (a difference of $686.50).

After making the $275 payment to your parents, you are still $411.50/mo to the good.  Another advantage of the higher down payment is that you can avoid the CMHC premium which in this case would be over $20,000 in fees that add to your cost of home ownership.  You can experiment with a CMHC fee calculator here.

Mortgage Insurance

Mortgage Insurance protects the mortgage lender against borrower default. In other words, it compensates the bank or broker in the event that you’re unable to make your payment obligations at some point in the future.

Generally speaking, the smaller your mortgage down payment, the higher your insurance premiums.

Mortgages with down payments worth less than 20% of the home’s value are called high ratio mortgages.

Mortgages with down payments worth 20% or more of the home’s value are called conventional mortgages.

Mortgage Term

A mortgage’s ‘term’ is the length of time your interest rate and options stay in effect – usually between 6 months and 10 years. At the end of a mortgage term, you can renegotiate your mortgage rate and payment options with your lender.  

Remember the tip above about staying on your existing amortization schedule as you will be paying off your balance hundreds of dollars per month faster by not starting back at zero.

Canada’s New Mortgage Stress Test

Since January of 2018, Canadian’s buying a home with a down payment of 20% or more are now subject to a new "stress test" that measures the homebuyer’s ability to afford their mortgage payments if interest rates rise in the future.

The stress test measures your ability to afford an approximately 2% increase in interest rates above your mortgage rate.

The test is largely based on how much you earn and owe each month. To pass the test, the portion of your income used for mortgage payments should not be higher than ~30%, and your monthly personal debt load should not be higher than 40% of your pre-tax income.

Making an Offer

If you’ve already been pre-approved for a mortgage and you’ve found a fitting home, the next step is to make an offer and negotiate. Unless you’re a shrewd and practiced negotiator, this is where a buying agent can really step up to get you the best deal possible.

There is a wide spectrum of negotiating style and ability among real estate agents.  The majority are now relying heavily on text messaging and electronic delivery like docusign and email.  Although convenient, much is lost in translation.  Years ago, when offers were written on carbon paper and email wasn't an option, agents had to go and see the seller and the seller’s agent to present their buyer’s offer.  As a result, agents became good at reading the situation in person, and developed presentation and nuanced negotiation abilities.  Much of this is lost in this day in age.  It would serve you well to ask your agent if they intend to physically present your offer to the seller and whether or not they are well trained in the art of negotiation.

At Vantage West Realty, we are true students of negotiation, and we pay tribute to the way it was once done by seeking to present our clients offers in person whenever possible.  Our commitment to negotiation mastery has shown up in that our client’s offers are accepted more often, and for quantifiably less money than the industry averages.

Negotiations are perhaps the most important skills your agent employs to protect you.  Make sure you select an agent to represent you that understands this.

The offer, called an Agreement of Purchase and Sale, will include the home’s sale price, your deposit amount, the date you’ll take possession, and any other items or conditions to be included with the sale.  

It is within this agreement that your buyer’s agent will include various clauses that protect you.  Conditions like finance, inspection, disclosure and title search are fairly standard.  There are also specialty clauses that good agents use to protect their clients interests, things like cleaning clauses and appliance warranties can save you a ton of inconvenience, expense and heart ache once you move into your new home.

Your agent should go through this agreement line by line to ensure that your offer represents your unique needs as well as provides the necessary protections.When the offer is accepted by the seller, next you’ll take the paperwork back to your bank or mortgage broker to complete the financing approval.

Closing Day

Closing day is the most memorable step of the home buying journey - it’s the day you finalize the deal and take possession of your new home. 

A few days before closing, you’ll meet with your lawyer to review the paperwork and make your deposit. The lawyer then prepares a Statement of Accounts that shows how much money is owed to complete the deal.

On closing day, the home will be registered in your name, proceeds will be exchanged and you are officially a home owner! 

Possession Day

Often confused with closing day, but typically a day or two after closing, this is the glorious day that you receive the keys to the front door of your new home.  Your agent should be with you to ensure a smooth key hand off, all included items are indeed left behind and that you are a happy camper.  And you may literally be camping these first few nights as you haven't unpacked or taken delivery of furniture.  Not to worry, a pizza night on milk crates on the living room floor of the home that you bought is one of the more memorable experiences of being a new home owner, enjoy this moment! 

Closing Costs / Hidden Costs 

Many first time home buyers get surprised by the smaller expenditures that add up when buying a home. This section sheds light onto these costs so you know what to expect when it comes time to pay the bills. 

Legal Fees

Real estate lawyers handle all the legal paperwork involved with buying a property like title documents, mortgage documents, GST certificates, and purchase agreements.

When you’re buying, you can expect to pay between $800 to $2000 in legal fees when all is said and done.

Property Tax & Utility Adjustments

Adjustments are payments made between the buyer and seller to account for either unpaid or prepaid operating costs - usually property taxes, condo fees, and electricity bills. 

For example, a home seller who prepays for one year of property taxes but then sells their house half-way through the year would ask for 6 month’s worth of property taxes from the buyer.

Adjustments also go the other way - for example, if a home seller has not paid their electricity bill for several months, the outstanding balance would be paid out to the buyer who inherits the bill.

Title Insurance

A home’s “title” is an official claim on its ownership. When you buy a house, you become the new title holder and are registered in a government land registration system. 

Title insurance protects your home title from losses due to things like fraud, undisclosed liens, forgery, and identify theft. In most cases, title insurance is required to get a mortgage. For a half million dollar home, buyers can expect to pay between $250 to $500 for title insurance.

Property Transfer Tax

When you buy a home in Canada, you’re required to pay a property transfer tax and file a property transfer tax return. This process looks slightly different from province to province, but usually means a 1-2% tax on the fair market value of the home. In BC it is calculated as 1% of the first 200k and 2% on the balance.

First time home buyers are exempt from this tax up to a maximum purchase price of $500,000 so bear this in mind. 

Who Qualifies for the Exemption from the PTT as a First Home Buyer? You qualify for the exemption if:

1. You are a Canadian citizen, or a permanent resident as defined by the Immigration and Refugee Protection Act (Canada),

2. You have lived in BC for 12 consecutive months immediately before the date you register the property, or you have filed two income tax returns as a British Columbia resident during the 6 years before the date you register the property,

3. You have never owned an interest in a principal residence anywhere in the world at any time (a principal residence is defined as the usual place where an individual lives), and

4. You have never received a first time home buyers exemption or refund

Moving Expenses

Hiring movers in Canada starts around $1000 for a small apartment and closer to $2500 for a three-bedroom house. If you’re moving a great distance, expect to pay a lot more. The average mover from Toronto to Vancouver can expect to pay closer to $6000.

Tax Credits and Incentives

There are a number of ways to save money when you’re buying your first home in Canada by taking advantage of federal and provincial tax credits and financial incentives.

First-Time Home Buyers Program 

The First Time Home Buyers' Program reduces or eliminates the property transfer tax that BC residents pay when buying their first home. As of 2019, the property must have a fair market value of less than $505,000 in order to qualify. 

If you’re purchasing a home worth $500,000 and are 100% exempt, the First-Time Home Buyers program would save you around $7000.

Canadian Home Buyers Plan 

As of 2019 the Canadian Home Buyers Plan (HBP) lets you withdraw up to $35k from your Registered Retirement Savings Plan (RRSP) to put towards buying or building your first home. The only catch is that you’ll need to pay yourself back within 15 years or else face tax penalties on the $35k.

You can think of the Home Buyers Plan as an interest-free loan from your own RRSP.

GST / HST New Housing Rebate

If you’re buying a new home, building, or substantially renovating a home with a fair market value less than $450k, you can write off some of the GST and HST. The rebate is also available for new cooperative housing, mobile homes, and even floating homes for you adventurous types.

Moving Expenses        

If you’re buying a house for a move related to work or school, you’ll be able to claim a deduction on some of the moving expenses. Things like travel costs, temporary living expenses, transportation, and incidentals are all covered. 

Home Businesses

If you use your home as both a primary residence and your principal place of work, you’re eligible to claim a number of expenses like utilities, insurance, property taxes, mortgage interest, and even cleaning supplies.

Home Insurance

While it isn’t legally mandated in Canada like car insurance, home insurance is well worth the investment and might be required by your lender to close on a home. If your home is valued around $500k, expect to pay around $1000 per year for home insurance.

What’s usually covered by home insurance:

• Damage, theft, and loss of your home or property

• Damage from fire, hail, and wind

• Accidents that happen on your property

• Possessions that get stolen from your vehicle

• Accidental damage that you might cause to somebody else’s property

• Incidental hotels and other expenses if you’re forced to vacate your property

What isn’t covered by home insurance:

• Damage from flooding or earthquakes

• Damage due to burst pipes or sewer backup

• Jewelry, fine art, and rare collectibles 

• Pest damage

• Damage to the home’s foundation

If you’re renting out your home to somebody else you’ll need Income Property Insurance. Compared to standard home insurance policies, Income Property Insurance plans offer more liability coverage towards the property and less coverage towards personal belongings.

Make sure all of your renters buy Tenant Insurance which covers their own personal belongings and any potential liability claims on your property.

Ongoing Home Expenses

If you’re moving out of an apartment situation that had bundled monthly payments, you might be surprised at the amount of separate payments that go along with owning a house.

Property Taxes

Every municipality in Canada charges homeowners an annual property tax to pay for things like roads, schools, hospitals, snow removal, and water treatment.

Your property taxes are based on your home’s assessed value and will.

Property taxes vary city to city. An owner of a $500,000 assessed home in Kelowna in 2019 would pay around $2600 in property taxes, while a $500,000 homeowner in Vancouver would pay closer to $1250.

Utilities

As a homeowner you’ll be responsible for making regular utility payments to your local municipality to pay for water usage, garbage collection, and sewers.

Most municipalities charge a flat rate for sewer and garbage, and metered rates for water usage. For an average-sized home, expect to pay around $100 / month in utilities, but check with your local municipality for billing rates.

Electricity & Natural Gas

Electricity and natural gas are charged separately from utilities, and are usually billed through FortisBC or BC Hydro. For an average-sized home with 4 occupants, expect to pay at least $100 for electricity and gas.

Also, be sure to budget for internet, phone, TV, and any labor costs involved with the installations.

Condo Fees

If you’re moving into a condo or townhome, you’ll be responsible for paying strata fees which go towards maintaining the common areas of the property.

Strata fees vary widely by city and by building. In Metro Vancouver strata fees generally range from $0.30 to $0.40 per square foot. This works out to $300-400 / mo for a 1000 sq ft, 2 bedroom apartment. Luxury buildings with pools, gyms, and concierge services get closer to $0.60 per square foot.

Be careful with developers offering abnormally low condo fees. Some developers will bait condo buyers with low fees that end up being unsustainable in the long run. Eventually the strata council will have to increase fees and you’ll be on the hook.

Home Maintenance & Repair

As a general rule, set aside at least 1% of the purchase price of your home for repairs every year. For a $500,000 home, this means squirrelling away $5000 for unexpected repairs and expenses.

Renovations & Home Improvements          

Renovations are the fastest way to increase your home’s value, and they can make life at home a lot more enjoyable. Some of the highest return-on-investment renovations are the kitchen, bathrooms, and master bedroom, but minor improvements can also provide excellent returns. Things like fresh paint, new moldings, fixtures, and hardwood floors - which might be hiding beneath the carpet or linoleum - are some of the lowest hanging fruit to increase your home’s value.

Hiring a Contractor vs DIY

While some folks are more than capable of doing their own minor home renos, anything involving mechanical, plumbing, electrical, or structural work requires professional input and advice. There are tons of videos online that make it look like anyone can renovate a house, but skilled trades require actual skills and real experience.

If you found the right tutorial video, would you be eager to fix your own tooth cavity? Some things are better left to the experts.

Most renovations are managed by a handyman or general contractor who organizes their own team of subcontractors to provide building materials and complete the work. You really get what you pay for in the construction industry, and it is vital to select a reputable contractor with a successful track record. The best thing you can do is speak with some of their past clients to get a review or just see some of their work.

The Okanagan Valley is booming with building and renovation work so it can be tough to find a good contractor. In all cases, make sure your contractor has a business license, the appropriate liability insurance to work on your property, and that you utilize a contract.

I will repeat that last point. Always get a contract - in this industry, and any other. It’s unfortunately not unheard of for shady contractors to take deposits for work and then skip out on the job, or otherwise delay the work. A contract gives you some amount of legal protection; however, enforcing contracts can be costly and lengthy legal process, so the best thing to do is work with a reputed contractor.

New Home Warranty Program

Newly built homes in BC, Alberta, Manitoba, Ontario, and Quebec come with a new home warranty that covers any defects in materials and construction. The warranty is backed by the building firm, but only covers the original work performed by their crew. If you buy a new home and then install some new electrical outlets in the basement, you may completely invalidate your home’s warranty, which leaves you unprotected in the event that something does go wrong.

Furniture & Décor

The topic of furniture and interior decor is worthy of its own article, but it’s something to keep in mind with your overall budget. For your first home, put aside at least a few thousand for furniture upgrades and additions.

Security Systems

A good security system is one of the most valuable investments you can make for your home and the people living in it. They prevent break-ins, theft, protect your loved ones from harm, and decrease your insurance premiums between 5-20%. On top of that, they increase your home’s market value and provide peace of mind while you’re not at home.

A minimal home security installation with entry-point sensors and motion detectors will run around $2500, with additional service fees around $20-30 per month. If you’re planning for security cameras, gas detection, smart locks, smart-phone integration, expect to pay a lot more.

DIY

A number of do-it-yourself home security options like Nest now offer basic video monitoring, perimeter, and motion detection features at lower costs than the traditional providers like ADT. If your motion alarm gets tripped, these DIY security systems typically send you a phone notification but might not alert the emergency services. Additionally, DIY home security options usually do not reduce your insurance premiums.

We hope this guide helps to eliminate some of the uncertainty that comes along with buying your first home in Canada.

If you have any questions that were not answered in this guide, or if you’re ready to take the first steps towards buying a home, please feel free to reach out to me directly at [email protected]